Release Property Documents within 30 Days on Repayment or Settlement of Loans, Else Pay Rs5,000 per Day as Compensation: RBI
Moneylife Digital Team 15 September 2023
Paying heed to the grievances of borrowers, the Reserve Bank of India (RBI) has directed all regulated entities (REs), like banks and financial institutions, to release property documents within 30 days after repayment or settlement of personal loans. In case of failure to release documents, lenders will have to pay Rs5,000 per day to the borrower as compensation. Further, for loss or damage to original property documents, RBI has asked REs to assist the borrower in obtaining duplicate or certified copies of the movable or immovable property documents at own cost. Readers would recall that some of these suggestions were made by Moneylife Foundation in its representation to the Kanungo Committee appointed by RBI to review customer service standards in banks and other REs. The Foundation pointed out the absence of standard operating procedures (SOPs) and a lack of penalties for banks, even when customer issues are handled poorly.
In a circular, RBI says, "The guidelines on fair practices code issued since 2003, REs are required to release all movable or immovable property documents upon receiving full repayment and closure of loan account. However, it has been observed that the REs follow divergent practices in release of such movable or immovable property documents leading to customer grievances and disputes. The REs shall release all the original movable or immovable property documents and remove charges registered with any registry within a period of 30 days after full repayment/ settlement of the loan account."
"The borrower shall be given the option of collecting the original movable or immovable property documents either from the banking outlet or branch where the loan account was serviced or any other office of the RE where the documents are available, as per her preference," it added.
In case of delay in releasing of original property documents or failing to file charge satisfaction form with the relevant registry beyond 30 days after full repayment or settlement of the loan, RBI says, the RE should communicate to the borrower reasons for such delay. "In case where the delay is attributable to the RE, it shall compensate the borrower at the rate of Rs5,000 for each day of delay."
Further, for loss or damage to original property documents, REs are asked to assist the borrower in obtaining duplicate or certified copies of the movable or immovable property documents and should bear the associated costs, in addition to paying the compensation of Rs5,000 per day. However, RBI says, in such cases, an additional time of 30 days (total 60 days) will be available to the REs to complete this procedure and the delayed period penalty will be calculated thereafter.
"The compensation provided under these directions shall be without prejudice to the rights of a borrower to get any other compensation as per any applicable law," RBI added.
The banking regulator also asked lenders to mention in the loan sanction letters issued on or after the effective date, the timeline and place of return of original movable or immovable property documents.
"To address the contingent event of demise of the sole borrower or joint borrowers, the REs should have a well laid out procedure for return of original movable or immovable property documents to the legal heirs. Such procedure shall be displayed on the website of the REs along with other similar policies and procedures for customer information," RBI says.
As Moneylife pointed out, lost property documents permanently damage asset values, and there is a need for regulatory solutions for fair deals to borrowers. "One would assume that RBI and the National Housing Bank (NHB), as regulators, would have issued a circular or directive with a clear, time-bound process to be followed by a lender who misplaces or loses a property document. None exists. Instead, every victim is pushed through a harrowing process of fighting a legal battle." (Read: Lost Property Documents Permanently Damage Asset Values: Regulatory Solution Required for Fair Deal to Borrowers)
Original property documents are essential, as they help establish ownership and prevent disputes. In addition to this, these documents are also helpful in facilitating future transactions and in other property-related matters. Ownership documents, like title deeds, serve as legal validation of one's property ownership.
Earlier this month, in one more order, the national consumer disputes redressal commission (NCDRC) rapped ICICI Bank Ltd for not keeping safe an original property document of a borrower and trying to shift the liability to a courier company. It directed ICICI Bank to pay Rs25 lakh as compensation and Rs50,000 litigation costs to the borrower. (Read: Lost Property Documents: ICICI Bank Asked To Pay Rs25 Lakh Compensation; Reconstruct and Hand Over Duly Certified Copies to Borrower)   
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3 months ago
Good details.I think one more issue which can be added is .This should be prominently displayed in the bank premises to bring awareness of customer.Also when taking a loan the person signs a document and in that also it should be clearly mentioned that after the loan payment period is over and the bank will return the documents and for every day of delay after closing the loan amount the bank will pay the aforesaid amount as per RBI rules and in that way it will have some committment from the bank and also bring the customer to know about the rules
Kamal Garg
Replied to r_ashok41 comment 3 months ago
I agree with the observations.
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